FIRST COMMUNITY BANKSHARES INC VA

Note*1.*** Basis of Presentation andSignificant****Accounting Policies**

Basis of Presentation

First Community Bankshares, Inc. (the “Company”) is a financial holding company incorporated under the laws of the Commonwealth of Virginia. The Company’s principal executive office is located in Bluefield, Virginia. The Company provides banking products and services to individual and commercial customers through its wholly owned subsidiary First Community Bank (the “Bank”), a Virginia-chartered banking institution founded in1874. The Bank offers wealth management and investment advice through its Trust Division and wholly owned subsidiary First Community Wealth Management (“FCWM”). Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” refer to First Community Bankshares, Inc. and its subsidiaries as a consolidated entity.

Principles of Consolidation

The Company’s accounting and reporting policies conform with U.S. generally accepted accounting principles (“GAAP”) and prevailing practices in the banking industry. The consolidated financial statements include all accounts of the Company and its wholly owned subsidiaries and eliminate all intercompany balances and transactions. The Company operates inone business segment, Community Banking, which consists of all operations, including commercial and consumer banking, lending activities, and wealth management.

The Company maintains investments in variable interest entities (“VIEs”). VIEs are legal entities in which equity investors donot have sufficient equity at risk for the entity to independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or donot have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity. Consolidation of a VIE is required if a reporting entity is the primary beneficiary of the VIE. The Company periodically reviews its VIEs and has determined that it isnot the primary beneficiary of any VIE; therefore, the assets and liabilities of these entities arenot consolidated into the financial statements.

Reclassification

Certain amounts reported in prior years have been reclassified to conform to the current year’s presentation. These reclassifications hadno effect on the Company’s results of operations, financial position, or net cash flow.

Use of Estimates

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Summary of Significant Accounting Policies

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants. Market participants are buyers and sellers in the principal market that are independent, knowledgeable, able to transact, and willing to transact.

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The fair value hierarchy ranks the inputs used in measuring fair value as follows:

The Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis. The Company* maybe required to record certain assets at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment. Methodologies used to determine fair value might be highly subjective and judgmental in nature; therefore, valuations may**not* be precise. If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective reporting period.

Cash and Cash Equivalent**s

Cash and cash equivalents include cash and due from banks, federal funds sold, and interest-bearing balances on deposit with the Federal Home Loan Bank ("FHLB"), the Federal Reserve Bank of Richmond ("FRB"), and correspondent banks that are available for immediate withdrawal.

Investment* *Securities

Management classifies debt securities as held-to-maturity or available-for-sale based on the intent and ability to hold the securities to maturity. Debt securities that the Company has the intent and ability to hold to maturity are classified as held-to-maturity securities and carried at amortized cost. Debt securitiesnot classified as held to maturity are classified as available-for-sale securities and carried at estimated fair value. Available-for-sale securities consist of securities the Company intends to hold for indefinite periods of time including securities to be used as part of the Company’s asset/liability management strategy and securities that* maybe sold for a variety of reasons. Unrealized gains and losses on available-for-sale securities are included in accumulated other comprehensive income (“AOCI”), net of income taxes, in stockholders’ equity. Gains or losses on calls, maturities, or sales of investment securities are recorded based on the specific identification method and included in noninterest income. Premiums are amortized tofirst* call date and discounts are accreted over the life of a security into interest income.

Management evaluates securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby Management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses and the creation of an allowance for credit losses. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) our intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that we will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7)third party guarantees, and (8) collateral values. The Company evaluates impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value. The nature of the collateral is considered along with potential future changes in collateral values, default rates, delinquency rates,third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses in the Statement of Income and establish an allowance for credit losses on the Balance Sheet.

The Company excludes the accrued interest receivable, from the amortized cost basis in measuring expected credit losses on the investment securities. Nor does the Company record an allowance for credit losses onaccrued interest receivable. As of* December 31, 2024*, the accrued interest receivable for investment securities available for sale was $694 thousand compared to $1.25 million as of* December 31, 2023*.

Other Investments

As a condition of membership in the FHLB and the Federal Reserve, the Company is required to hold a minimum level of stock in the FHLB of Atlanta and the FRB of Richmond. These securities are carried at cost and periodically reviewed for impairment. The total investment in FHLB and FRB stock, which is included in other assets, was $12.78 million as of* December 31, 2024*, and $13.04 million as of* December 31, 2023*.

The Company owns certain long-term equity investments without readily determinable fair values, including certain tax credit limited partnerships and various limited liability companies that manage real estate investments, facilitate tax credits, and provide title insurance and other related financial services. These investments are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. The total carrying value in these investments, which is included other assets, totaled $3.62 million as of* December 31, 2024*, and $3.70 million as of* December 31, 2023*.

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Business Combinations

The Company accounts for business combinations using the acquisition method of accounting as outlined in using Topic805 of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). Under this method, all identifiable assets acquired, including purchased loans, and liabilities assumed are recorded at fair value. Any excess of the purchase price over the fair value of net assets acquired is recorded as goodwill. In instances where the price of the acquired business is less than the net assets acquired, a gain on the purchase is recorded. Fair values are assigned based on quoted prices for similar assets, if readily available, or appraisals by qualified independent parties for relevant asset and liability categories. Certain financial assets and liabilities are valued using discount models that apply current discount rates to streams of cash flow. Valuation methods require assumptions, which can result in alternate valuations, varying levels of goodwill or bargain purchase gains, or amortization expense or accretion income. Management must make estimates for the useful or economic lives of certain acquired assets and liabilities that are used to establish the amortization or accretion of some intangible assets and liabilities, such as core deposits. Fair values are subject to refinement for up toone year after the closing date of the acquisition as additional information about the closing date fair values becomes available. Acquisition and divestiture activities are included in the Company’s consolidated results of operations from the closing date of the transaction. Acquisition and divestiture related costs are recognized in noninterest expense as incurred. For additional information, see “Purchased Credit Deteriorated Loans” and “Intangible Assets” below.

Loans Held for Investment

Loans classified as held for investment are originated with the intent to hold indefinitely, until maturity, or until pay-off. Loans held for investment are carried at the principal amount outstanding, net of unearned income and any necessary write-downs to reduce individual loans to net realizable value. Interest income on performing loans is recognized as interest income at the contractual rate of interest. Loan origination fees, including loan commitment and underwriting fees, are reduced by direct costs associated with loan processing, including salaries, legal review, and appraisal fees. Net deferred loan fees are deferred and amortized over the life of the related loan or commitment period.

Purchased Performing Loans*.* Purchased loans that are deemed to be performing at the acquisition date are accounted for using the contractual cash flow method of accounting, which results in the loans being recorded at fair value with a credit discount. The fair value discount or premium is accreted or amortized, as the case* may*be, as an adjustment to yield over the estimated contractual lives of the loans.

*PurchasedCredit Deteriorated **(“PCD”)*Loans. Purchased credit-deteriorated, otherwise referred to herein as PCD, assets are defined as acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. The Company records acquired PCD loans by adding the expected credit losses (i.e. allowance for credit losses) to the purchase price of the financial assets rather than recording through the provision for credit losses in the income statement. The expected credit loss, as of the acquisition date, of a PCD loan is added to the allowance for credit losses. The non-credit discount or premium is the difference between the fair value and the amortized cost basis as of the acquisition date. Subsequent to the acquisition date, the change in the ACL on PCD loans is recognized through the provision for credit losses. The non-credit discount or premium is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis. In accordance with the transition requirements within the standard, the Company’s acquired purchased credit impaired loans were treated as PCD loans.

Individually Evaluated Loans and Nonperforming Assets. The Company maintains an active and robust problem credit identification system through its ongoing credit review function. When a loanno longer shares similar risk characteristics with its segment, the asset is assessed to determine whether it should be included in another pool or should be individually evaluated. The Company currently maintains a net book balance threshold of $500,000 for individually-evaluated loans. Generally, individually-evaluated loans are on nonaccrual status. Based on the threshold above, consumer loans will generally remain in pools unless they meet the dollar threshold and foreclosure is probable. The expected credit losses on individually-evaluated loans will be estimated based on discounted cash flow analysis unless the loan meets the criteria for use of the fair value of collateral, either by virtue of an expected foreclosure or through meeting the definition of collateral-dependent. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms werenot considered to be unique to the asset. The Company follows its nonaccrual policy by reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. Therefore, Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and doesnot record an allowance for credit losses on "AIR". The accrual of interest, which is based on the daily amount of principal outstanding, on individually evaluated loans is generally continued unless the loan becomes delinquent90 days or more.

Loans are considered past due when either principal or interest payments become contractually delinquent by30 days or more. The Company’s policy is to discontinue the accrual of interest, if warranted, on loans based on the payment status, evaluation of the related collateral, and the financial strength of the borrower. Loans that are90 days or more past due are placed on nonaccrual status. Management* mayelect to continue the accrual of interest when the loan is well secured and in process of collection. When interest accruals are discontinued, interest accrued andnot* collected in the current year is reversed from income, and interest accrued andnot collected from prior years is charged to the allowance for credit losses. Nonaccrual loans* maybe returned to accrual status when all principal and interest amounts contractually due, including past due payments, are brought current; the ability of the borrower to repay the obligation is reasonably assured; and there is generally a period of at leastsix* months of repayment performance by the borrower in accordance with the contractual terms.

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Seriously delinquent loans are evaluated for loss mitigation options. Closed-end retail loans are generally charged off against the allowance for credit losses when the loans become120 days past due. Open-end retail loans and residential real estate secured loans are generally charged off when the loans become180 days past due. Unsecured loans are generally charged off when the loans become90 days past due. All other loans are charged off against the allowance for credit losses after collection attempts have been exhausted, which generally is within120 days. Recoveries of loans previously charged off are credited to the allowance for credit losses in the period received.

Effective* January 1, 2023,the Company adopted Financial Accounting Standards Board issued ASU2022*-02, Financial Instruments-Credit Losses (Topic326), Troubled Debt Restructurings and Vintage Disclosures. The allowance for credit losses incorporates an estimate of lifetime credit losses and is recorded on each asset upon origination. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the the time of the modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generallynot recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness that is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. Additionally, the Company* may*allow a loan to go interest only for a specified period of time.

Other real estate owned (“OREO”) acquired through foreclosure, or other settlement, is carried at the lower of cost or fair value less estimated selling costs. The fair value is generally based on currentthird-party appraisals. When a property is transferred into OREO, any excess of the loan balance over the net realizable fair value is charged against the allowance for credit losses. Operating expenses, gains, and losses on the sale of OREO are included in other noninterest expense in the Company’s consolidated statements of income after any fair value write-downs are recorded as valuation adjustments.

Allowance for Credit Losses (ACL)

The Company reviews our allowance for credit losses quarterly to determine if it is sufficient to absorb expected credit losses in the portfolio. This determination requires management to make significant estimates and assumptions. While the Company uses its best judgment and available information, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond our control, including the performance of our loan portfolio, the economy, changes in interest rates, and the view of regulatory authorities towards loan classifications. These uncertainties* may*result in material changes to the allowance for credit losses in the near term; however, the amount of the change cannot reasonably be estimated.

The ACL is an estimate of losses that will result from the inability of borrowers to make required loan payments. The Company established the incremental increase in the ACL at the adoption through retained earnings and subsequent adjustments will be made through a provision for credit losses charged to earnings. Loans charged off are recorded against the ACL and subsequent recoveries increase the ACL when they are recognized.

A systematic methodology is used to determine ACL for loans held for investment and certain off-balance sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. The Company considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgement and reflects management’s best estimate within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s ACL is calculated using collectively evaluated and individually evaluated loans.

The Company collectively evaluates loans that share similar risk characteristics. In general, loans are segmented by loan purpose. The Company collectively evaluates loans within the following consumer and commercial segments: Loans secured by1-4 Family Properties, Home Equity Lines of Credit (“HELOC”), Owner Occupied Construction Loans, Consumer Loans, Commercial and Industrial, Multi-family, Non-farm/Non-residential Property, Commercial Construction/A&D/other Land Loans, Agricultural Loans, Credit Card Loans, Loans Secured by Farmland, and Other Consumer Loans (Overdrafts).

Risk characteristics of residential real estate loans which include loans secured by Single family properties, HELOC, and Owner occupied construction loans are dependent upon individual borrowers who are affected by changes in general economic conditions, real estate valuations, and the demand for housing. Commercial and Industrial, Multi-family residential, Non-farm/non-residential, Agricultural, and Loans secured by Farmland are similar in that they are generally dependent upon the borrower's internal cash flow from operations to service the debt and changes in general economic conditions. Commercial construction, Development, and other land loans, Consumer, and Other consumer loans (open pool) are similar in that they are dependent on changes in general economic conditions.

For collectively evaluated loans, the Company uses a combination of discounted cash flow and open pool to estimate expected credit losses. During2022, the Company changedthird party model providers which necessitated a change from remaining life to open pool for the portfolios noted above. The change in method wasnot quantitatively significant. In addition to its own loss experience, management also includes peer bank historical loss experience in its assessment of expected credit losses to determine the ACL. The Company utilized call report data to measure its and its peers' historical credit losses experience with similar risk characteristics within the segments over an economic cycle. The Company reviewed the historical loss information to appropriately adjust for differences in current asset specific risk characteristics. Also considered were further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that existed for the period over which historical information was evaluated. For the majority of the segments of collectively evaluated loans, the Company incorporated at leastone macroeconomic driver using a statistical regression modeling methodology.

The Company considers forward-looking information in estimated expected credit losses. The Company subscribes to athird-party service which provides summary detail of dozens of economic forecasts. Using that information and other publicly available economic forecasts, management determines the economic variables to use for theone-year reasonable and supportable forecast period. Management has determined that the forecast period is consistent with how the Company has historically forecasted for its profitability planning and capital management. Management has evaluated the appropriateness of the reasonable and supportable forecast for the current period along with the inputs used in the estimation of expected credit losses. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to historical loss information overeight quarters using a straight-line approach. Management* may*apply different reversion techniques depending on the economic environment for the financial asset portfolio and as of the current period has utilized a linear reversion technique.

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Included in its systematic methodology to determine its ACL for loans held for investment and certain off-balance sheet credit exposures, The Company considers the need to qualitatively adjust expected credit losses for informationnot already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation. Each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following:1) changes in lending policies and procedures,2) changes in economic conditions,3) changes in portfolio nature and volume,4) changes in management,5) changes in past due loans,6) changes in the quality of the Company’s credit review system,7) changes in the value of underlying collateral,8) the effect of concentrations of credit, and9) the effect of other external factors.

When a loanno longer shares similar risk characteristics with its segment, the asset is assessed to determine whether it should be included in another pool or should be individually evaluated. The Company currently maintains a net book balance threshold of $500,000 for individually-evaluated loans. Generally, individually-evaluated loans are on nonaccrual status. Based on the threshold above, consumer loans will generally remain in pools unless they meet the dollar threshold and foreclosure is probable. The expected credit losses on individually-evaluated loans will be estimated based on discounted cash flow analysis unless the loan meets the criteria for use of the fair value of collateral, either by virtue of an expected foreclosure or through meeting the definition of collateral-dependent. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms werenot considered to be unique to the asset.

When loans are acquired they are identified as either purchased credit deteriorated ("PCD") or non-PCD. PCD loans represent assets that are acquired with evidence of more than insignificant credit quality deterioration since the origination of the loans as of the acquisition date. The ACL for PCD assets is recognized within the business combination accounting withno initial impact to net income. Changes is estimates of expected credit losses on PCD loans after acquisition are recognized as provision expense (or reversal of provision expense) in subsequent periods as they arise.

Non-PCD loans acquired are generally estimated at fair value using a discounted cash flow approach with assumptions of discount rate, remaining life, prepayments, probability of default, and loss given default. The actual cash flows on these loans could differ materially from the fair value estimates. The amount we record as the fair values for the loans is generally less than the contractual unpaid principal balance due from the borrowers, with the difference being referred to as the "discount" on the acquired loans. Discounts on acquired non-PCD loans are accreted to interest income over their estimated remaining lives, which* may*include prepayment estimates in certain circumstances. The ACL for non-PCD assets is recognized as provision expense in the same reporting period as the business combination. Estimated credit losses for acquired loans are determined using methodologies and applying estimates and assumptions similar to originated performing loans.

As previously noted, effective* January 1, 2023,the Company adopted Financial Accounting Standards Board issued ASU2022*-02, Financial Instruments-Credit Losses (Topic326), Troubled Debt Restructurings and Vintage Disclosures. The allowance for credit losses incorporates an estimate of lifetime credit losses and is recorded on each asset upon origination. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the the time of the modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generallynot recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness that is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. Additionally, the Company* may*allow a loan to go interest only for a specified period of time.

The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. The expected losses associated with these exposures within the unfunded portion of the loans will be recorded as a liability on the balance sheet with an offsetting income statement expense. The Company has determined that a majority of the Company’s off-balance-sheet credit exposures arenot unconditionally cancellable. As of* December 31, 2024*, the liability recorded for expected credit losses on unfunded commitments in Other Liabilities was $341 thousand compared to $746 thousand as of* December 31, 2023*. The estimates are determined based on the likelihood of funding during the contractual term and an estimate of credit losses subsequent to funding. Estimated credit losses on subsequently funded balances are based on the same assumptions as used to estimate credit losses on existing funded loans. The current adjustment to the ACL for unfunded commitments is recognized through provision for credit losses in the Statement of Income. Prior to2023, the current adjustment to the ACL for unfunded commitments was recognized through other operating expense in the Statement of Income. For additional information, see Note6, “Allowance for Credit Losses,” to the Consolidated Financial Statements in Item8 of this report.

Premises and Equipment

Premises, equipment, and leases are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets. Useful lives range from 5 to 10 years for furniture, fixtures, and equipment;3 to 5 years for computer software, hardware, and data handling equipment; and 7 to 40 years for buildings and building improvements. Land improvements are amortized over a period of 20 years and leasehold improvements are amortized over the lesser of the term of the respective leases plus thefirst optional renewal period, when renewal is reasonably assured, or the estimated useful lives of the improvements. The Company leases various properties within its branch network. Leases generally have initial terms of up to 10 years and most contain options to renew with increases in rent. All leases are accounted for as operating leases. Maintenance and repairs are charged to current operations while improvements that extend the economic useful life of the underlying asset are capitalized. Disposition gains and losses are reflected in current operations.

Intangible Assets

Intangible assets consist of goodwill, core deposit intangible assets, and other identifiable intangible assets that result from business combinations. Goodwill represents the excess of the purchase price over the fair value of net assets acquired that is allocated to the appropriate reporting unit when acquired. Core deposit intangible assets represent the future earnings potential of acquired deposit relationships that are amortized over their estimated remaining useful lives. Other identifiable intangible assets primarily represent the rights arising from contractual arrangements that are amortized using the straight-line method.

An interim analysis of Goodwill is performed quarterly, and goodwill is tested for impairment annually, on* October**31st,* or more frequently if events or circumstances indicate there* maybe impairment. We haveone reporting unit, Community Banking. If we elect to perform a qualitative assessment, we evaluate factors such as macroeconomic conditions, industry and market considerations, overall financial performance, changes in stock price, and progress towards stated objectives in determining if it is more likely thannot* that the fair value of our reporting unit is less than its carrying amount. If we conclude that it is more likely thannot that the fair value of our reporting unit is less than its carrying amount, a quantitative test is performed; otherwise,no further testing is required. The quantitative test consists of comparing the fair value of our reporting unit to its carrying amount, including goodwill. If the fair value of our reporting unit is greater than its book value,no goodwill impairment exists. If the carrying amount of our reporting unit is greater than its calculated fair value, a goodwill impairment charge is recognized for the difference.

Management has concluded that there wasno goodwill impairment for2024 and2023.

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Bank Owned Life Insurance

The Company has purchased life insurance policies on certain key executives and personnel. The value recorded on the balance sheet is the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other changes or amounts due that are probable at settlement.

Other Comprehensive Income

Other comprehensive income includes unrealized gains and losses on securities available-for-sale and changes in the funded status of the nonqualified domestic, noncontributory defined benefit plans which are recognized as separate components of equity.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonable estimated. For additional information, see Note19, “Litigation, Commitments, and Contingencies,” to the Consolidated Financial Statements in Item8 of this report.

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recognized as short-term borrowings in the Company’s consolidated balance sheets. Securities, generally U.S. government and federal agency securities, pledged as collateral under these arrangements can be sold or repledged only if replaced by the secured party. The fair value of the collateral provided to athird party is continually monitored and additional collateral is provided as appropriate.

Derivative Instruments

The Company primarily uses derivative instruments to protect against the risk of adverse price or interest rate movements on the value of certain assets and liabilities and on future cash flows. Derivative instruments represent contracts between parties that usually require little orno initial net investment and result inone party delivering cash or another asset to the other party based on a notional amount and an underlying asset as specified in the contract such as interest rates, equity security prices, currencies, commodity prices, or credit spreads. These derivative instruments* mayconsist of interest rate swaps, floors, caps, collars, futures, forward contracts, and written and purchased options. Derivative contracts often involve future commitments to exchange interest payment streams or currencies based on a notional or contractual amount, such as interest rate swaps or currency forwards, or to purchase or sell other financial instruments at specified terms on a specified date, such as options to buy or sell securities or currencies. Derivative instruments are subject to counterparty credit risk due to the possibility that the Company will incur a loss because a counterparty, which maybe a bank, a broker-dealer or a customer, fails to meet its contractual obligations. This risk is measured as the expected positive replacement value of contracts. Derivative contracts may*be executed only with exchanges or counterparties approved by the Company’s Asset/Liability Management Committee.

If certain conditions are met, a derivative* maybe designated as a hedge related to fair value, cash flow, or foreign exposure risk. The recognition of changes in the fair value of a derivative instrument varies depending on the intended use of the derivative and the resulting designation. The Company accounts for hedges of customer loans as fair value hedges. The change in fair value of the hedging derivative and the change in fair value of the hedged exposure are recorded in earnings. Any hedge ineffectiveness is also reflected in current earnings. Changes in the fair value of derivativesnot* designated as hedging instruments are recognized as a gain or loss in earnings. The Company formally documents any relationships between hedging instruments and hedged items and the risk management objective and strategy for undertaking each hedged transaction. All derivative instruments are reported at fair value in the consolidated balance sheets.

Equity-Based Compensation

The cost of employee services received in exchange for equity instruments, including stock options and restricted stock awards, is generally measured at fair value on the grant date. The Black-Scholes-Merton valuation model is used to estimate the fair value of stock options at the grant date while the fair value of restricted stock awards is based on the market price of the Company’s common stock on the grant date. The Black-Scholes-Merton model incorporates the following assumptions: the expected volatility is based on the weekly historical volatility of the Company’s common stock price over the expected term of the option; the expected term is generally calculated using the shortcut method; the risk-free interest rate is based on the U.S. Department of the Treasury’s (“Treasury”) yield curve on the grant date with a term comparable to the grant; and the dividend yield is based on the Company’s dividend yield using the most recent dividend rate paid per share and trading price of the Company’s common stock. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the restriction period for restricted stock awards. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Revenue Recognition

Wealth management. Wealth management income represents monthly fees due from wealth management customers in consideration for managing and administrating the customers' assets. Wealth management and trust services include custody of assets, investment management, escrow services, fees for trust services and similar fiduciary activities. Revenue is recognized when the performance obligation is completed each month, which is generally the time that payment is received. Income also includes fees received from athird party broker-dealer as part of a revenue-sharing agreement for fees earned from customers that are referred to thethird party. These fees are paid to the Company by thethird party on a quarterly basis and recognized ratably throughout the quarter as the performance obligation is satisfied.

Service charges on deposits and other service charges and fees.

Service charges on deposits and other service charges and fees represent general service fees for account maintenance and activity and transaction-based fees that consist of transaction-based revenue, time-based revenue (service period), item-based revenue, or some other individual attribute-based revenue. Revenue is recognized when the performance obligation is completed, which is generally monthly for account maintenance services or when a transaction has been completed. Payment for such performance obligations is generally received at the time the performance obligations are satisfied. Other service charges and fees include interchange income from debit and credit card transaction fees.

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Advertising Expenses

Advertising costs are generally expensed as incurred. The Company* may*establish accruals for incurred advertising expenses in the course of a fiscal year.

Income Taxes

Income tax expense is comprised of the current and deferred tax consequences of events and transactions already recognized. The Company includes interest and penalties related to income tax liabilities in income tax expense. The effective tax rate, income tax expense as a percent of pre-tax income,* may*vary significantly from statutory rates due to tax credits and permanent differences. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are adjusted through the provision for income taxes as changes in tax laws or rates are enacted.

Per Share Results

Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of potential common stock that could be issued by the Company. Under the treasury stock method of accounting, potential common stock* may*be issued for stock options, non-vested restricted stock awards, performance based stock awards, and convertible preferred stock. Diluted earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding for the period plus the number of dilutive potential common shares. The calculation of diluted earnings per common share excludes potential common shares that have an exercise price greater than the average market value of the Company’s common stock because the effect would be antidilutive.

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RecentAccounting Standards

Standards Adopted

In* November 2023,the FASB issued ASUNo.* 2023-07, "Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures". The amendment requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker. This ASU became effective for the Company on* December 31, 2024.The Company hasone* reportable segment and as such, adoption of ASUNo. 2023-07 didnot have a material impact on the Company's financial statements.

StandardsNot* Yet Adopted*

In* December 2023,the FASB issued ASU2023*-09, “Income Taxes (Topic740).” The amendments in this ASU are related to the rate reconciliation and income taxes paid disclosures and are designed to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The ASU will be effective for annual periods beginning* January 1, 2025and will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted for annual financial statements that havenot* yet been issued or made available for issuance. The adoption of this pronouncement isnot expected to have a material impact on the Consolidated Financial Statements.

In* November 2024,the FASB issued ASUNo.* 2024-03, "Expense Disaggregation Disclosures (Topic230): Disaggregation of Income Statement Expenses". The amendment requires disclosure of disaggregated information about specific expense categories underlying certain income statement expense line items. This ASU will become effective for the Company on* December 31, 2027.*

The Company doesnot expect other recent accounting standards issued by the FASB or other standards-setting bodies to have a material impact on the consolidated financial statements.

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Note2**.**** Acquisitions and**** **Divestitures

On* September 16, 2022,the Company completed the sale of its Emporia, Virginia branch (the "Emporia Branch Sale") to Benchmark Community Bank ("Benchmark"). The sale included the branch real estate, certain personal property, and all deposits associated with the branch. There wereno* loans included in the transaction. Benchmark paid a deposit premium oftwo percent for certain deposits. In addition, Benchmark paid $1.50 million for branch real estate and certain personal property. Total deposits acquired by Benchmark totaled $61.05 million. The deposits were composed of $18.38 million in demand, $28.46 million in interest-bearing demand, $11.52 million in savings, and $2.69 million in time deposits. The Company recognized a gain of $1.66 million from the Emporia Branch Sale.

On* November 18, 2022,the Company and NC-based Surrey Bancorp ("Surrey"), parent company of Surrey Bank & Trust, jointly announced their entry into an agreement and plan of merger pursuant to which First Community would acquire Surrey and its wholly-owned bank subsidiary, Surrey Bank & Trust. Under the terms of the agreement and plan of merger, each share of Surrey common stock immediately converted into the right to receive 0.7159 shares of the Company's common stock. The transaction was consummated on April 21, 2023.*The total purchase price for the transaction was $71.37 million.

The Surrey transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. Fair values are preliminary and subject to refinement for up to a year after the closing date of the acquisition. The Company incurred a total of $2.99 million in merger expenses related to the Surrey transaction, $596 thousand was recorded in the last quarter of2022 and $2.39 million in thefirst nine months of2023. These costs were primarily related to data conversion, investment banking fees, and legal fees.

Goodwill arising from business combinations represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the fair value of the liabilities assumed. The Surrey acquisition resulted in the Company recognizing $14.38 million in goodwill. The primary identifiable intangible asset we typically record in connection with a whole bank or bank branch acquisition is the value of the core deposit intangibles which represents the estimated value of the long-term deposit relationships acquired in the transaction. Determining the amount of identifiable intangible assets and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions: customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates. The core deposit intangibles are amortized over the estimated useful lives of the deposit accounts based on a method that we believe reasonably approximates the anticipated benefit stream from this intangible. Core deposit intangibles for the Surrey transaction totaled $12.70 million.

When loans are acquired they are identified as either purchased credit deteriorated PCD or non-PCD. PCD loans represent assets that are acquired with evidence of more than insignificant credit quality deterioration since the origination of the loans as of the acquisition date. The ACL for PCD assets is recognized within business combination accounting withno initial impact to net income. Changes in estimates of expected credit losses on PCD loans after acquisition are recognized as provision expense (or reversal of provision expense) in subsequent periods as they arise. Non-PCD loans acquired are generally estimated at fair value using a discounted cash flow approach with assumptions of discount rate, remaining life, prepayments, probability of default, and loss given default. The actual cash flows on these loans could differ materially from the fair value estimates. The amount we record as the fair values for the loans is generally less than the contractual unpaid principal balance due from the borrowers, with the difference being referred to as the “discount” on the acquired loans. Discounts on acquired non-PCD loans are accreted to interest income over their estimated remaining lives, which* mayinclude prepayment estimates in certain circumstances. The ACL for non-PCD assets is recognized as provision expense in the same reporting period as the business combination. Estimated credit losses for acquired loans are determined using methodologies and applying estimates and assumptions similar to originated performing loans. The fair value of purchased loans with credit deterioration was $101.42 million on the date of acquisition with the gross contractual amount totaling $111.22 million. The Company estimates that $2.01 million of contractual cash flows specific to the purchased loans with credit deterioration willnot* be collected. Non purchased credit deteriorated loans acquired had a fair value of $137.55 million with a gross contractual value of $143.55 million.

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Explanation of fair value adjustments;

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N****ote3**.**** DebtSecurities**

The following tables present the amortized cost and fair value of available-for-sale debt securities, including gross unrealized gains and losses, as of the dates indicated:

The following table presents the amortized cost and fair value of available-for-sale debt securities, by contractual maturity, as of* December 31, 2024*. Actual maturities could differ from contractual maturities because issuers* may*have the right to call or prepay obligations with or without penalties.

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The following tables present the fair values and unrealized losses for available-for-sale debt securities in a continuous unrealized loss position for less than12 months and for12 months or longer as of the dates indicated:

There were 103 individual debt securities in an unrealized loss position as of* December 31, 2024*, and their combined depreciation in value represented 8.74% of the debt securities portfolio. There were 112 individual debt securities in an unrealized loss position as of* December 31, 2023*, and their combined depreciation in value represented 5.02 % of the debt securities portfolio.

There wereno sales of available for sale debt securities in2024 nor in2022. Approximately $38.98 million in securities available for sale were sold in2023. Gross gains and gross losses were $30 thousand and $51 thousand, respectively for* December 31, 2023.The carrying amount of securities pledged for various purposes totaled $24.64 million as of December 31, 2024*, and $145.09 million as of* December 31, 2023*.

In determining whether ornot a security is impaired, we consider the severity of the loss as well as our intent to hold the securities to maturity or the recovery of the cost basis. Unrealized losses havenot been recognized into income as the decline in fair value is largely due to changes in interest rates and other market conditions. Management doesnot intend to sell and it is likely that management willnot be required to sell the securities prior to their anticipated recovery.

U.S. Treasury securities

U.S. Treasury securities are backed by the full faith and credit of the United States government. At* December 31, 2024*, the total amortized cost of available for sale U. S. Treasury securities was $55.76 million. Based on management's analysis and judgement, there wereno credit losses attributable to U.S. Treasury securities at* December 31, 2024*.

Municipal securities

Municipal securities are securities issued by various municipalities in the United States. At* December 31, 2024*, the total amortized cost of available for sale Municipal securities was $13.95 million. The majority of the portfolio was rated AA or higher, withno securities rated below investment grade at year-end. Based on management's analysis and judgement, there wereno credit losses attributable to Municipal securities at* December 31, 2024*.

Corporate Notes

Corporate notes are debt obligations issued by public or private corporations. As of* December 31, 2024*, the total amortized cost of available for sale Corporate notes was $28.60 million. The majority of the portfolio was rated AA or higher, withno securities rated below investment grade at year-end. Based on management's analysis and judgement, there wereno credit losses attributable to Corporate note securities at* December 31, 2024*.

Mortgage-backed Agency securities

Mortgage-backed Agency securities within the Company's portfolio are issued by Ginnie Mae, Fannie Mae, and Freddie Mac. As of* December 31, 2024*, the total amortized cost of available for sale mortgage-backed Agency securities was $86.38 million. Each agency provides a guarantee of full and timely payments of principal and interest by the issuing agency. Based on management's analysis and judgement, there wereno credit losses attributable to mortgage-backed Agency securities at* December 31, 2024*.

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Note4**.**** **Loans

The Company groups loans intothree segments (commercial loans, consumer real estate loans, and consumer and other loans) with each segment divided into various classes. Customer overdrafts reclassified as loans totaled $1.82 million as of* December 31, 2024*, and $1.50 million as of* December 31, 2023*. Deferred loan fees were $6.60 million as of* December 31, 2024*, and $7.71 million as of* December 31, 2023*. For information about off-balance sheet financing, see Note19, “Litigation, Commitments, and Contingencies,” to the Consolidated Financial Statements of this report.

In accordance with the adoption of ASU2016-13, the table below reflects the loan portfolio at the amortized cost basis for the periods indicated, to include net deferred loan fees of $6.60 million as of* December 31, 2024*, and $7.71 million as of* December 31, 2023*. Additionally, included is, the unamortized discount total related to loans acquired of $12.39 million as of* December 31, 2024*, and $15.29 million as of* December 31, 2023*. Accrued interest receivable of $8.51 million as of* December 31, 2024*, and $9.64 million as of* December 31, 2023*, is accounted for separately and reported in Interest Receivable on the Consolidated Balance Sheet.

The following table presents loans, net of unearned income by loan class, as of the dates indicated:

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**Note5. **Credit Quality

The Company uses a risk grading matrix to assign a risk grade to each loan in its portfolio. Loan risk ratings* may*be upgraded or downgraded to reflect current information identified during the loan review process. The general characteristics of each risk grade are as follows:

The following tables present the recorded investment of the loan portfolio, by loan class and credit quality, as of the dates indicated.

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The following tables present the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of the dates indicated:

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The Company generally places a loan on nonaccrual status when it is90 days or more past due. The following table presents nonaccrual loans by loan class, as of the dates indicated:

In both2024 and2023 nonaccrual loan interest recognized was immaterial.

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The following tables presents the aging of past due loans by loan class, as of the date indicated. Nonaccrual loans30 days or more past due are included in the applicable delinquency category.

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ASC326 prescribes that when an entity determines foreclosure is probable, the expected credit loss is required to be measured based on the fair value of the collateral. As a practical expedient, an entity* may*use the fair value as of the reporting date when recording the net carrying amount of the asset. For the collateral dependent asset ("CDA") a credit loss expense is recorded for loan amounts in excess of fair value of the collateral. The table below summarizes collateral dependent loans, where foreclosure is possible, by type of collateral, and the extent to which they are collateralized during the periods.

The Company* maymake concessions in interest rates, loan terms and/or amortization terms when restructuring loans for borrowers experiencing financial difficulty. Effective, January 1, 2023,the Company adopted ASU2022*-02, Financial Instruments-Credit Losses (Topic326), Troubled Debt Restructurings and Vintage Disclosures. The amendments eliminated TDR accounting guidance for issuers that adopted ASU2015-13, created a single loan modification accounting model, and clarified disclosure requirements for loan modifications and write-offs. Presented below are the amortized cost basis and percentage of loan class for loan modifications made to borrowers experiencing financial difficulty by loan class, concession type, and financial effect as of the date indicated.

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Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. As of* December 31, 2024*, there wereno modified loans (or portions of a loan) deemed uncollectible.

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the lasttwelve months:

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The following table provides information about OREO, which consists of properties acquired through foreclosure, as of the dates indicated:

Note6**.**** **Allowance for Credit Losses

The following tables present the changes in the allowance for credit losses, by loan segment, during the periods indicated.

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Note*7***.**** Premises,Equipment, and****Leases**

Premises and Equipment

The following table presents the components of premises and equipment as of the dates indicated:

There wereno impairment charges related to certain long-term investments in land and buildings in2024, in2023, or in2022. Depreciation and amortization expense for premises and equipment was $4.35 million in2024, $3.95 million in2023, and $4.15 million in2022.

Leases

Operating leases are recorded as a right of use (“ROU”) asset and operating lease liability. The ROU asset is recorded inother assets, while thelease liability is recorded inother liabilities on the condensed balance sheet beginning* January 1, 2019,when the Company adopted ASU2016*-02, on a prospective basis. The ROU asset represents the right to use an underlying asset during the lease term and the lease liability represents the obligation to make lease payments arising from the lease. The ROU asset and lease liability have been recognized based on the present value of the lease payments using a discount rate that represented our incremental borrowing rate at the lease commencement date or the date of adoption of ASU2016-02. The lease expense, which is comprised of the amortization of the ROU asset and the implicit interest accreted on the lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expense in the condensed statements of income.

The Company’s current operating leases relate totwo existing bank branches andone operating lease acquired in a prior bank acquisition. The acquired operating lease was for vacant land and will terminate in* Julyof2029.* The Company's ROU asset was $489 thousand as of* December 31, 2024*, compared to $594 thousand as of* December 31, 2023*. The operating lease liability as of* December 31, 2024*, was $515 thousand compared to $620 thousand as of* December 31, 2023*. The Company’s total operating leases have remaining terms of 3 months to 4.5 years compared with 1 years to 5.5 years as of* December 31, 2023*. The* December 31, 2024*, weighted average discount was 3.39%, compared to 3.24% from* December 31, 2023*.

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Future minimum lease payments as of the dates indicated are as follows:

Lease expense which is included in occupancy expense on the Consolidated Statement of Income was $178 thousand in2024, $171 thousand in2023, and $175 thousand in2022. The Company maintainedno subleases as of* December 31, 2024*.

Note*8***.**** **Goodwill and Other Intangible Assets

Goodwill

The Company hasone reporting unit for goodwill impairment testing purposes, Community Banking. The Company performed its annual assessment of goodwill as of* October 31,*2024, and concluded that the carrying value of goodwill wasnot impaired.No events have occurred after the analysis to indicate potential impairment.

As of* December 31, 2024*, and as of* December 31, 2023*, the Company's goodwill totaled $143.95 million. The Surrey acquisition resulted in the Company recognizing $14.38 million in goodwill in the transaction. The balance was $129.57 million for2022.

Other Intangible Assets

As of* December 31, 2024*, the remaining lives of core deposit intangibles ranged from 6 months to 8 years with a weighted average remaining life of 7.63 years. The Surrey acquisition resulted in the Company recognizing $12.70 million in core deposit intangibles. The following table presents the components of other intangible assets as of the dates indicated:

Amortization expense for other intangible assets was $2.13 million in2024, $1.73 million in2023, and $1.45 million in2022.

The following schedule presents the estimated amortization expense for intangible assets, by year, as of* December 31, 2024*:

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Note*9***.**** **Deposits

The following table presents the components of deposits as of the dates indicated:

The following schedule presents the contractual maturities of time deposits, defined as certificates of deposits and individual retirement accounts, by year, as of* December 31, 2024*:

Time deposits of*$250* thousand or more totaled $22.39 million as of* December 31, 2024*, and $18.59 million as of* December 31, 2023*. The following schedule presents the contractual maturities of time deposits of*$250* thousand or more as of* December 31, 2024*:

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Note10**.**** **Borrowings

The following table presents the components of borrowings as of the dates indicated:

Repurchase agreements are secured by certain securities that remain under the Company’s control during the terms of the agreements. The counterparties* mayredeem callable repurchase agreements, which could substantially shorten the borrowings’ lives. The prepayment or early termination of a repurchase agreement mayresult in substantial penalties based on market conditions. The following schedule presents the contractual maturities of repurchase agreements, by type of collateral pledged, as of December 31, 2024*:

As of* December 31, 2024*, unused borrowing capacity with the FHLB totaled $352.32 million, net of FHLB letters of credit of $122.72 million. The Company pledged $475.03 million in qualifying loans to secure the FHLB letters of credit, which provide an attractive alternative to pledging securities for public unit deposits.

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Note*11***. Derivative Instruments and Hedging Activities**

Generally, derivative instruments help the Company manage exposure to market risk and meet customer financing needs. Market risk represents the possibility that fluctuations in external factors such as interest rates, market-driven loan rates, prices, or other economic factors will adversely affect economic value or net interest income.

The Company has used interest rate swap contracts to modify its exposure to interest rate risk caused by changes in benchmark interest rates in relation to certain designated fixed rate loans. These instruments are used to convert these fixed rate loans to an effective floating rate. If the Secured Overnight Financing Rate ("SOFR") plus a spread falls below the loan’s stated fixed rate for a given period, the Company will owe the floating rate payer the notional amount times the difference between the floating rate and the stated fixed rate. If SOFR is above the stated rate for a given period, the Company will receive payments based on the notional amount times the difference between the floating rate and the stated fixed rate.

Certain of the Company's interest rate swaps qualify as fair value hedging instruments. Therefore, fair value changes in the derivative and hedged item attributable to the hedged risk are recognized in earnings in the same period. The fair value hedges were effective as of* December 31, 2024*.

The following table presents the notional, or contractual, amounts and fair values of derivative instruments as of the dates indicated:

The following table presents the interest component of derivative and hedging activity, if applicable, on the consolidated statements of income for the periods indicated:

Note*12***. Employee Benefit Plans**

Defined Benefit Plans

The Company maintainstwo nonqualified domestic, noncontributory defined benefit plans (the “Benefit Plans”) for key members of senior management and non-management directors. The Company’s unfunded Benefit Plans include the Supplemental Executive Retention Plan (“SERP”) and the Directors’ Supplemental Retirement Plan (“Directors’ Plan”). The SERP provides for a defined benefit, at normal retirement age, targeted at 35% of the participant’s projected final average compensation, subject to a defined maximum annual benefit. Benefits under the SERP generally become payable at age 62. The Directors’ Plan provides for a defined benefit, at normal retirement age, up to 100% of the participant’s highest consecutivethree-year average compensation. Benefits under the Directors’ Plan generally become payable at age 70. The SERP was frozen near the end of2021; the Directors' Plan was fundamentally frozen at that time as well. The following table presents the changes in the aggregate actuarial benefit obligation for thetwo plans combined during the periods indicated:

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The following table presents the components of net periodic pension cost, the effect on the consolidated statements of income, and the assumed discount rate for the periods indicated:

The following schedule presents the projected benefit payments to be paid under the Benefit Plans, by year, as of* December 31, 2024*:

Deferred Compensation Plan

The Company maintains deferred compensation agreements with certain current and former officers that provide benefit payments, over various periods, commencing at retirement or death. There wereno accrued benefits, which are based on the present values of expected payments and estimated life expectancies, as of* December 31, 2024* or2023. There wasno deferred compensation plan expense in2024,2023, or2022.

The Company maintains a deferred compensation plan, referred to as the WRAP, and is a voluntary, non-tax qualified deferred compensation plan available to certain employees, including executive officers. Under the plan, participants* maydefer a portion of their base and/or annual incentive compensation. The plan is intended to mirror the Corporation's qualified KSOP, and mayinclude discretionary match that coincides with a match made to the KSOP to the extent participants cannot otherwise receive the full match in the KSOP. The balance as of December 31, 2024* and2023 was $8.73 million and $8.28 million, respectively.

Employee Welfare Plan

The Company provides various medical, dental, vision, life, accidental death and dismemberment, and long-term disability insurance benefits to all full-time employees who elect coverage under this program. Athird-party administrator manages the health plan. Monthly employer and employee contributions are made to a tax-exempt employee benefits trust where thethird-party administrator processes and pays claims. As of* December 31, 2024*, stop-loss insurance coverage generally limits the Company’s risk of loss to $200 thousand for individual claims and $5.56 million for aggregate claims. Health plan expenses were $4.10 million in2024, $4.16 million in2023, and $4.04 million in2022.

Employee Stock Ownership and Savings Plan

The Company maintains the Employee Stock Ownership and Savings Plan (“KSOP”) that consists of a401(k) savings feature that covers all employees that meet minimum eligibility requirements. The Company matches employee contributions at levels determined by the Board of Directors annually. These contributions are made in thefirst quarter following each plan year and employees must be employed on the last day of the plan year to be eligible. Matching contributions to qualified deferrals under the401(k) savings component of the KSOP totaled $1.89 million in2024, $1.76 million in2023, and $1.82 million in2022. The KSOP held 266,533 shares of the Company’s common stock as of* December 31, 2024*,282,072 shares as of* December 31, 2023*, and 309,019 shares as of* December 31, 2022*.

Equity-Based Compensation Plans

The Company maintains equity-based compensation plans to promote the long-term success of the Company by encouraging officers, employees, directors, and other individuals performing services for Company to focus on critical long-range objectives. The Company’s most current equity-based compensation plans include the2022 Omnibus Equity Compensation Plan (the*“2022* Plan”), which authorized 1,000,000 shares for potential grants of Non-Qualified Stock Options, Incentive Stock Options, Performance Shares, Performance Stock Units, Restricted Stock, Restricted Stock Units, and Performance Awards. The Company’s Compensation and Retirement Committee determines the vesting period for each grant; however, awards shall have a minimum vesting/exercise schedule of at leastone year, except that a shorter vesting/exercise schedule* mayapply tonot* more than5% of the shares authorized for issuance under the2022 Plan.

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The following table presents the pre-tax compensation expense and excess tax benefit recognized in earnings for all equity-based compensation plans for the periods indicated:

Stock Options

The following table presents stock option activity and related information for the year ended* December 31, 2024*:

There wereno options granted in2024. There were 51,088 options exercised in2024 and 4,288 options exercised in2023. The intrinsic value of options exercised was $832 thousand in2024, and $58 thousand in2023. As of* December 31, 2024*, there wasno unrecognized compensation cost related to nonvested stock options.

Restricted Stock and Stock Unit Awards

The following table presents restricted stock activity and related information for the year ended* December 31, 2024*:

As of* December 31, 2024*, unrecognized compensation cost related to nonvested restricted stock/unit awards totaled $2.47 million with an expected weighted average recognition period of 1.91 years. The actual compensation cost recognized might differ from this estimate due to various items, including new awards granted and changes in estimated forfeitures.

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Note*13***. Other Operating Income and Expense**

The following table presents the components of other operating income and expense for the periods indicated:

Note*14***. Income Taxes**

Income tax expense is comprised of current and deferred, federal and state income taxes on the Company’s pre-tax earnings. The following table presents the components of the income tax provision for the periods indicated:

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The Company’s effective tax rate, income tax as a percent of pre-tax income,* may*vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies. The following table reconciles the Company’s income tax expense to the amount computed by applying the federal statutory tax rate to pre-tax income for the periods indicated:

Deferred taxes derived from continuing operations reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for tax purposes. The following table presents the significant components of the net deferred tax asset as of the dates indicated:

The Company hadno unrecognized tax benefits or accrued interest or penalties as of* December 31, 2024* or2023. The Company hadno deferred tax valuation allowance recorded as of* December 31, 2024* or2023, as management believes it is more likely thannot that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. The Company and its subsidiaries are subject to U.S. federal income tax of the various states. The Company isno longer subject to examination by federal or state taxing authorities for years before2021.

At* December 31, 2024,the Company hadno* federal or state net operating loss carryforwards.

The Company has analyzed the tax positions taken, or expected to be taken in its tax returns, and concluded it hasno liability related to uncertain tax positions.

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Note*15***. Accumulated Other Comprehensive Income**

The following table presents the changes in AOCI, net of tax and by component, during the periods indicated:

The following table presents reclassifications out of AOCI, by component, during the periods indicated:

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Note*16***. Fair Value**

Financial Instruments Measured at Fair Value

The following discussion describes the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments under the valuation hierarchy.

Assets and Liabilities Reported at Fair Value on a Recurring Basis

Available-for-Sale Debt Securities. Debt securities available for sale are reported at fair value on a recurring basis. The fair value of Level1 securities is based on quoted market prices in active markets, if available. If quoted market prices arenot available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are primarily derived from or corroborated by observable market data. Level2 securities use fair value measurements from independent pricing services obtained by the Company. These fair value measurements consider observable data that* mayinclude dealer quotes, market spreads, cash flows, the Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and bond terms and conditions. The Company’s Level2* securities include U.S. Agency and Treasury securities, municipal securities, and mortgage-backed securities. Securities are based on Level3 inputs when there is limited activity or less transparency to the valuation inputs. In the absence of observable or corroborated market data, internally developed estimates that incorporate market-based assumptions are used when such information is available.

Fair value models* maybe required when trading activity has declined significantly or doesnot* exist, prices arenot current, or pricing variations are significant. For Level3 securities, the Company obtains the cash flow of specific securities fromthird parties that use modeling software to determine cash flows based on market participant data and knowledge of the structures of each individual security. The fair values of Level3 securities are determined by applying proper market observable discount rates to the cash flow derived fromthird-party models. Discount rates are developed by determining credit spreads above a benchmark rate, such as SOFR, and adding premiums for illiquidity, which are based on a comparison of initial issuance spread to SOFR versus a financial sector curve for recently issued debt to SOFR. Securities with increased uncertainty about the receipt of cash flows are discounted at higher rates due to the addition of a deal specific credit premium based on assumptions about the performance of the underlying collateral. Finally, internal fair value model pricing and external pricing observations are combined by assigning weights to each pricing observation. Pricing is reviewed for reasonableness based on the direction of specific markets and the general economic indicators.

Equity Securities. Equity securities are recorded at fair value on a recurring basis and included in other assets in the consolidated balance sheets. The Company uses Level1 inputs to value equity securities that are traded in active markets. Equity securities that arenot actively traded are classified in Level2.

Loans Held for Investment. Loans held for investment are reported at fair value using the exit price notion, which is derived fromthird-party models. Loans related to fair value hedges are recorded at fair value on a recurring basis.

Deferred Compensation Assets and Liabilities. Securities held for trading purposes are recorded at fair value on a recurring basis and included in other assets in the consolidated balance sheets. These securities include assets related to employee deferred compensation plans, which are generally invested in Level1 equity securities. The liability associated with these deferred compensation plans is carried at the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.

Derivative Assets and Liabilities. Derivatives are recorded at fair value on a recurring basis. The Company obtains dealer quotes, Level2 inputs, based on observable data to value derivatives.

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The following tables summarize financial assets and liabilities recorded at fair value on a recurring basis, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

Changes in Level3* Fair Value Measurements*

The following table presents the changes in Level3 assets recorded at fair value on a recurring basis during the period indicated:

No transfers into or out of Level3 of the fair value hierarchy occurred during the year ended* December 31,*2024 or2023.

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Assets Measured at Fair Value on a Nonrecurring Basis

Impaired Loans.Prior to the adoption of ASU2016-13, impaired loans were recorded at fair value on a nonrecurring basis when repayment is expected solely from the sale of the loan's collateral. Fair value is based on appraised value adjusted for customized discounting criteria, Level3 inputs.

The Company maintains an active and robust problem credit identification system. The review includes obtainingthird-party collateral valuations to help management identify potential credit impairment and determine the amount of impairment to record. The Company’s Special Assets staff manages and monitors all impaired loans. Internal collateral valuations are generally performed withintwo tofour weeks of identifying the initial potential impairment. The internal valuation compares the original appraisal to current local real estate market conditions and considers experience and expected liquidation costs. The Company typically receives athird-party valuation withinthirty toforty-five days of completing the internal valuation. When athird-party valuation is received, it is reviewed for reasonableness. Once the valuation is reviewed and accepted, discounts are applied to fair market value, based on, butnot limited to, our historical liquidation experience for like collateral, resulting in an estimated net realizable value. The estimated net realizable value is compared to the outstanding loan balance to determine the appropriate amount of specific impairment reserve.

OREO. OREO is recorded at fair value on a nonrecurring basis using Level3 inputs. The Company calculates the fair value of OREO from current or prior appraisals that have been adjusted for valuation declines, estimated selling costs, and other proprietary qualitative adjustments that are deemed necessary.

The following tables present assets measured at fair value on a nonrecurring basis, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

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Quantitative Information about Level3* Fair Value Measurements*

The following table provides quantitative information for assets measured at fair value on a nonrecurring basis using Level3 valuation inputs as of the dates indicated:

The following tables present the carrying amounts and fair values of financial instruments, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

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Note*17***. Earnings per Share**

The following table presents the calculation of basic and diluted earnings per common share for the periods indicated:

Note18**. Related Party Transactions**

Loans to principal officers, directors, and their affiliates were as follows:

Deposits from related parties totaled $15.16 million as of* December 31, 2024*, and $15.19 million as of* December 31, 2023*. Legal fees paid to related parties totaled $81 thousand in2024, $41 thousand in2023, and $47 thousand in2022. There wereno lease payments paid to related parties in2024,2023, or2022. Other expense paid to related parties totaled $6 thousand in2024, $53 thousand in2023, and $23 thousand in2022.

Note*19***.**** Litigation, Commitments,**** and Contingencies**

Litigation

On* May 6, 2024,the Bank agreed to settle a putative class action lawsuit pending in the United States District Court for the Southern District of West Virginia, filed on June 24, 2022.The civil action alleges the Bank breached its deposit account agreements and was unjustly enriched by collecting overdraft fees with respect to certain debit card transactions and by assessing more thanone* nonsufficient funds fee on items presented multiple times for payment. The Bank denies each and every substantive allegation asserted in the civil action. Under the settlement, which is subject to documentation and preliminary and final court approval, the Bank agrees to establish a $4.80 million settlement fund and forgive up to $500,000 in assessed but unpaid fees. Attorneys’ fees, settlement administration expenses, and settlement payments to eligible class members will be paid from the settlement fund. Under the settlement, the Bank admittedno wrongdoing and will receive a complete release of all claims asserted in the civil action. The Bank agreed to the settlement in order to resolve the litigation and avoid further expense. The Company previously accrued $3.00 million as an estimated liability relating to this civil action.

The Company and its subsidiaries are currently involved in various legal proceedings in the normal course of business. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with all pending or threatened claims and litigation, utilizing the most recent information available. On a matter-by-matter basis, an accrual for loss is established for those matters which the Company believes it is probable that a loss* maybe incurred and that the amount of such loss can be reasonably estimated. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments. Accordingly, management’s estimate will change from time to time, and actual losses maybe more or less than the current estimate. For matters where a loss isnot* probable, or the amount of the loss cannot be estimated,no accrual is established.

We are currently a defendant in other legal actions and asserted claims in the normal course of business. Although we are unable to assess the ultimate outcome of each matter with certainty, we believe that the resolution of these actions shouldnot have a material adverse effect on our financial position, results of operations, or cash flows.

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Commitments and Contingencies

The Company is a party to financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and financial guarantees. These instruments involve, to varying degrees, elements of credit and interest rate risk beyond the amount recognized in the consolidated balance sheets. The contractual amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. If the other party to a financial instrument doesnot perform, the Company’s credit loss exposure is the same as the contractual amount of the instrument. The Company uses the same credit policies in making commitments and conditional obligations as it does for on balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there isno violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and* mayrequire payment of a fee. Since many commitments are expected to expire without being drawn on, the total commitment amounts donot* necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of each customer on a case-by-case basis. Collateral* may*include accounts receivable, inventory, property, plant and equipment, and income producing commercial properties. The Company maintains a reserve for the risk inherent in unfunded lending commitments, which is included in other liabilities in the consolidated balance sheets.

Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to athird party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit to customers. The amount of collateral obtained, if deemed necessary, to secure the customer’s performance under certain letters of credit is based on management’s credit evaluation of the customer.

The following table presents the off-balance sheet financial instruments as of the dates indicated:

Note20**.**** Regulatory Requirementsand Restrictions**

The Company and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, which applies only to the Bank, the Bank must meet specific capital guidelines that involve quantitative measures of the entity’s balance sheet assets and off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. In addition, the Company and the Bank are subject to various regulatory restrictions related to the payment of dividends, including requirements to maintain capital at or above regulatory minimums.

The current risk-based capital requirements, based on the international capital standards known as Basel III, requires the Company and the Bank to maintain minimum amounts and ratios of Common Equity Tier1 capital, Tier1 capital, and total capital to risk-weighted assets, and of Tier1 capital to average consolidated assets (“Tier1 leverage ratio”), as defined in the regulations. Basel III’s capital conservation buffer (“CCB”), which is intended to absorb losses during periods of economic stress, increased those minimum ratios by 2.5% on* January 1, 2019).*

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The following tables present actual and required capital ratios, under Basel III capital rules, as of the dates indicated:

Note21**.**** Segment Information**

The Company conducts its business activities through community banking. Community banking revolves around serving the community and customers where the bank has branches and offices. Community banking consists of commercial and consumer banking, lending activities, and wealth management.

The Company’s chief executive officer is in charge of allocating the Company’s resources and assessing the Company's performance, and as such, has been identified as the chief operating decision maker. The chief operating decision maker regularly reviews a multitude of reports that have a varying level of combined detail on products offered, however, all of the information and activity reviewed fall under the definition of community banking.

Based on the business activities and information reviewed by the chief operating decision maker, the Company hasone reportable segment - Community Banking.

The accounting policies of the community banking segment are the same as those for the Company described in Note 1. In accordance with ASC280, the Company has concluded that consolidated net income is the measure of segment profit or loss that is required to be reported because it is the measure determined in accordance with measurement principles that are most consistent with US GAAP. As the Company only hasone reportable segment, total segment net income and total segment assets are equivalent to the results disclosed in the accompanying Consolidated Statements of Income and Consolidated Balance Sheets, respectively

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Note22**.**** **Parent Company Financial Information

The following tables present condensed financial information for the parent company, First Community Bankshares, Inc., as of and for the dates indicated:

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Note23**.**** QuarterlyFinancial Data (Unaudited)**

The following tables present selected financial data for the periods indicated:

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Crowe LLP Independent Member Crowe Global

-Report of Independent Registered Public Accounting Firm** -**

Stockholders and the Board of Directors of First Community Bankshares, Inc.

Bluefield, Virginia

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of First Community Bankshares, Inc. (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance and Provision for Credit Losses on Loans–* Discounted Cash Flow*

As more fully described in Notes 1, 4, 5 and 6 of the financial statements, the allowance for credit losses (the “ACL”) is an accounting estimate of the expected credit losses in the loans held for investment portfolio. Expected credit losses are measured on a collective (pooled) basis for financial assets with similar risk characteristics. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. For collectively evaluated loans, the Company uses a combination of discounted cash flow model, which includes the use of probability of default and loss given default assumptions, and open pool model to estimate expected credit losses. For the majority of the segments of collectively evaluated loans, the Company incorporated at least one macroeconomic driver using a statistical regression. In addition, the Company considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process.

We identified auditing the ACL’s discounted cash flow model as a critical audit matter because of the extent of auditor judgment applied and significant audit effort, with the need to use our valuation specialists, to evaluate the high degree of judgments made by management related to the determination of the probability of default and loss given default (“the significant model assumptions”) within the discounted cash flow method for certain collectively evaluated loan segments.

The primary procedures performed to address the critical audit matter included:

Testing the effectiveness of internal controls over:

Substantively testing management’s estimate, which included:

/s/Crowe LLP

We have served as the Company's auditor since 2023.

Washington, D.C.

March 7, 2025

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of First Community Bankshares, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for the year then ended December 31, 2022, and the related notes to the consolidated financial statements (collectively, the “financial statements”) of First Community Bankshares, Inc. (the “Company”). In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations of the Company and cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Elliott Davis, PLLC

We served as the Company's auditor from 2022 to 2023.

Charlotte, North Carolina

February 22, 2023